India’s retail market to touch US $1.1 trillion by 2020: study

Retail and FMCG markets in India are exponentially growing and are expected to grow at 20% and 21% respectively per annum, according to the just published study jointly by MRRSIndia.com and ASSOCHAM. FMCG (fast moving consumer goods )market is expected to reach from the current level of US$ 49 billion to US$ 103.7 billion by 2020.

Releasing the study here today, the ASSOCHAM spokesman said, though the attention on the affluent and elite households in India, but the major focus has been in metros, state capitals and larger towns.

There is a strong and growing market in the next tier of towns with population of less than 1 million, these towns number more than 600 spread in the width and breath of India.

It is estimated that these 600 towns will add another 30% of elite/affluent households and is a sitting market set to be grabbed.

The rural FMCG market in India is expected to grow at a CAGR of 14.6 per cent, and reach US$ 220 billion by 2025 from US$ 29.4 billion in 2016. E-commerce and digital connectivity is not limited to the urban localities, with rural population using these services with high penetration of smart phones, credit cards/ debit cards and online banking services.

There are customers sitting in far and wide corners of India waiting to be serviced. Making their products available to them is next big challenge before large FMCG companies.

The study observed that Indian consumers have adopted new technologies and thus fundamentally modified the structure of demand. This demand is shaped by factors such as, noticeable shift in demographics with rising income middle class, rise in number of smaller towns entering consumption bandwagon, emergence of new channels like e-commerce, proliferation of the internet connectivity, demand driven by digital media. Given this to be state of things to be in future, decoding these consumption patterns would be critical for companies to re-imagine themselves and build new capabilities to win in this new world.

Health and wellness is a mega trend shaping consumer preferences and shopping habits and FMCG brands are listening. Leading global and Indian food and beverage brands have embraced this trend and are focused on creating new markets demands.

Identification of high growth categories for focus, most optimal type of transport needed to ensure efficient last mile delivery, development of spoke – hub models, multi modal models, growth of warehouses, multi-location manufacturing facilities, quality and packaging options, government policies for large infrastructure developments, highlighted the study.

The FMCG companies are banking on these opportunities, Retail industry being one of the main sources of pushing the products into the market with different discounts running through different retail chains. After the implementation of GST, retailers are expecting the FMCG companies to cut down on the prices of their products as the new regime brings new GST rates that could impact the consumers when buying a product. The retailers believe if the companies don’t revise their prices, they’ll lose around 2-3% margins as per the new rule, the retailers have to display the new GST rates for each item. In order to achieve better market growth, the retailers and the FMCG companies will have to work in Synergy, noted the study.

The ASSOCHAM said the large FMCG companies have focused primarily and made significant improvements to manufacturing, service and maintenance operations through lean techniques - for example eliminating waste, removing inflexibilities, introducing modular and variability in their systems reducing costs, improving efficiencies and building shareholders value. However, there is not much focus on similar stringent strategies for warehouse operations and transportations. The need of the hour to enhance availability and improve cost efficiencies is in the logistics and transportation sector.